The United States and Mexico reached an agreement last week after weeks of renegotiating NAFTA’s trade terms. However, the deal still has to be approved by each country’s lawmakers. Investors responded positively to the news as markets moved higher. The new deal touched on the tariff treatment of automobile imports from Mexico, wage requirements for automotive supply chain workers, and tariff-free agricultural imports and exports.
Meanwhile, the United States and Canada have been in discussions on a revised NAFTA deal, which was given a deadline by the Trump administration for last Friday. After a two-hour morning meeting, the deadline was missed. We expect a deal to be reached between all three parties sometime before the end of the year. The United States exported about $341 billion of goods and services to Canada in 2017, according to The Office of the U.S. Trade Representative website. Our top exports to Canada during 2017 included:
- Services ($58 billion)
- Vehicles ($52 billion)
- Machinery ($43 billion)
- Electrical machinery ($25 billion)
- Agricultural products ($24 billion)
- Mineral fuels ($20 billion)
- Plastics ($13 billion)
Markets continue to produce positive results without much volatility. The S&P 500 edged up 0.2 percent last week. The MSCI ACWI climbed 0.6 percent, and the Bloomberg BarCap Aggregate Bond Index dropped 0.1 percent. The positive results were part of strong overall performance in August. The S&P 500 rose 3.0 percent, and the global MSCI ACWI rose 0.6 percent. Bonds also rose 0.6 percent.
Strong months with little downside can create a desire to chase after returns. Keep in mind this market has been abnormally calm. The average July and August, since 1996, produced 12 moves in the S&P 500 of more than 1 percent in either direction. In 2018, there were none.
The Personal Consumption Expenditures (PCE) Index, which is the Fed’s preferred inflation measurement, rose 0.2 percent in July. This led to the year-over-year PCE being 2 percent, matching the Fed’s inflation target. Consumer spending, which accounts for two-thirds of economic activity, increased 0.4 percent in July, showing a very strong economy.
Inflation remains well within the Fed’s target range, and the improving jobs environment has not created any spikes. Given the strong economic environment, our outlook is for inflation to stay at or just above 2 percent. The risks remain to the upside if tight labor markets or trade disputes result in prices rising faster than expected.
KEY POINTS FOR THE WEEK
- Stocks edged higher on positive economic and trade news.
- Core inflation, as measured by the PCE, hit the Federal Reserve’s target of 2 percent.
- The United States, Canada, and Mexico are hoping to reach a trade agreement soon.
WHAT ARE WE READING?
Below are some articles we paid particularly close attention to this week. We encourage our readers to follow the links.
Trump Proposes Review of Rules for Required Minimum Distributions from Retirement Plans.
The President asked the Treasury to review potentially changing rules for retirement plan minimum distributions.
UPS Driver's Failed Delivery Note Becomes Viral Hit
A woman in North Carolina was wondering why her package never showed up, but when she checked her mailbox, she realized why. A UPS driver had left a failed delivery note that simply stated: “bear in driveway.” The woman, Marcy Lanier, found it so funny she posted the note on Facebook, and it quickly gained popularity.
“Progress is impossible without change, and those who cannot change their minds cannot change anything.”
~ George Bernard Shaw, Irish playwright
"I would never die for my beliefs because I might be wrong."
~Bertrand Russell, Mathematician
"Life is a great big canvas, and you should throw all the paint on it you can."
~ Danny Kaye, entertainer
Links & Disclaimers
RJFS and SPC do not offer or provide legal or tax advice. Tax services and analysis are provided by the related firm, S&M through a separate engagement letter with clients. Portions of this newsletter were prepared by Carson Group Coaching. Carson Group Coaching is not affiliated with RJFS, SPC or S&M. The information contained in this report does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. This information is not intended as a solicitation of an offer to buy, hold or sell any security referred to herein. There is no assurance any of the trends mentioned will continue in the future. Any opinions are those of the author and not necessarily those of RJFS. Any expression of opinion is as of this date and is subject to change without notice.
Opinions expressed are not intended as investment advice or to predict future performance. Economic forecasts set forth may not develop as predicted and there can be no guarantee that strategies promoted will be successful. Past performance does not guarantee future results. Investing involves risk, including loss of principal. Consult your financial professional before making any investment decision. Stock investing involves risk including loss of principal. The S&P 500 is an unmanaged index of 500 widely held stocks that is generally considered representative of the U.S. stock market. The Dow Jones Industrial Average (DJIA), commonly known as “The Dow” is an index representing 30 stock companies maintained and reviewed by the editors of the Wall Street Journal. Please note direct investment in any index is not possible.
The MSCI ACWI (All Country World Index) is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. As of June 2007 the MSCI ACWI consisted of 48 country indices comprising 23 developed and 25 emerging market country indices. The developed market country indices included are: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. The emerging market country indices included are: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. The Barclays Capital Aggregate Index measures changes in the fixed-rate debt issues rated investment grade or higher by Moody's Investors Service, Standard & Poor's, or Fitch Investors Service, in that order. The Aggregate Index is comprised of the Government/Corporate, the Mortgage-Backed Securities and the Asset-Backed Securities indices. Personal consumption expenditures (PCE), or the PCE Index, measures price changes in consumer goods and services.
Links are being provided for information purposes only. RJFS, SPC and S&M are not affiliated with and do not endorse, authorize or sponsor any of the listed websites or their respective sponsors, and they are not responsible for the content of any website, or the collection or use of information regarding any website's users and/or members.
RJ Approval # 2238644